Why III. hos­pi­tals ended deal

Ill. hos­pi­tals part; Pa. deal inches for­ward

Modern Healthcare - - FRONT PAGE - Joe Carl­son

Amid the on­go­ing na­tional wave of hospi­tal merg­ers, two health sys­tems in Rock­ford, Ill., de­cided last week to aban­don plans to com­bine op­er­a­tions fol­low­ing stiff op­po­si­tion from reg­u­la­tors in the Fed­eral Trade Com­mis­sion.

Rock­ford, a three-hospi­tal city in north­ern Illi­nois, was no stranger to such news. The April 12 an­nounce­ment that OSF Health­care Sys­tem had aban­doned plans to ac­quire Rock- ford Health Sys­tem marked the third hos­pi­tal­con­sol­i­da­tion pro­posal in 24 years there to fail, and the sec­ond one to stop af­ter ad­verse court de­ci­sions stem­ming from gov­ern­ment chal­lenges.

A week ear­lier, U.S. Dis­trict Judge Fred­er­ick Ka­pala im­posed a pre­lim­i­nary in­junc­tion halt­ing the trans­ac­tion un­til all ap­peals were ex­hausted be­cause he found that the FTC had proven that its ar­gu­ment that the merger would give the com­bined sys­tem 64% of the mar­ket for acute care was likely to pre­vail in court. That decision raised the prospect of a two-year le­gal bat­tle for the hos­pi­tals.

Mean­while in Pitts­burgh last week, the fi­nan­cially strug­gling West Penn Al­legheny Health Sys­tem got a dose of good news in its quest to be ac­quired by the re­gion’s dom­i­nant in­sur­ance plan, Highmark.

In what at­tor­neys said was an un­usual move, the U.S. Jus­tice Depart­ment is­sued a public state­ment April 10 an­nounc­ing that it was clos­ing an in-depth an­titrust in­ves­ti­ga­tion into Highmark’s pur­chase of West Penn Al­legheny. The state­ment ex­plained that the decision was based on a find­ing that the ac­qui­si­tion was likely to ac­tu­ally in­crease com­pe­ti­tion in the mar­ket.

Specif­i­cally, Jus­tice Depart­ment of­fi­cials wrote that the af­fil­i­a­tion would as­sure a much-needed in­fu­sion of up to $475 mil­lion into Pitts­burgh’s sec­ond-largest health­care provider, and that Highmark and West Penn had vir­tu­ally no over­lap­ping own­er­ship in hospi­tal or physi­cian ser­vices. Le­gal ob­servers also noted that UPMC, the re­gion’s largest provider, has its own in­te­grated health plan.

The two de­ci­sions last week had no­table dif­fer­ences, in­clud­ing the in­ves­ti­gat­ing agen­cies— FTC in Rock­ford, Jus­tice in Pitts­burgh—as well as the struc­ture of deals. Rock­ford was con­sid­ered a hor­i­zon­tal merger be­cause the ac­quirer

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